All posts tagged Grant Robertson

National spokesperson for finance Paul Goldsmith is nudging Minister of Finance Grant Robertson on the drip feeding of spending announcements.

Usually most spending is signalled in budgets – this year’s budget was published in mid-May, but unusually, due to the Covid pandemic, a there was a lot of additional spending plus $20 billion not allocated to anything specific.

Obviously spending on measures related to Covid would have to be announced and that would happen gradually as needed. But like $1 billion a year Provincial Growth Fund it leaves open perceptions and allegations of election campaign assistance.

Every Government times announcements they think will be favourable to their chances of re-election, it is a major benefit of incumbency. But most spending is signalled in the election year budget.

In Parliament’s Question Time yesterday:

Hon Paul Goldsmith: Does he stand by his response to my question on Tuesday, which asked how much additional spending he had so far planned to announce before the general election in September, “As the member knows, the Government has been very flexible all the way through our response to ensure we meet need as it arises, but I don’t have any specific plans in that regard.”?

Hon GRANT ROBERTSON: I stand by all of the statements I made in that answer, and I think the member’s impression wasn’t too bad just then.

Hon Paul Goldsmith: How did he not have any specific plans for new spending on Tuesday and then have his Government announce $400 million of new spending on Wednesday?

Hon GRANT ROBERTSON: The basis of that spending was in the Budget and the COVID-19 Response and Recovery Fund announcements we made.

Hon PAUL GOLDSMITH: Does he think he can just dismiss questions about his intentions for billions of dollars of spending?

Hon GRANT ROBERTSON: No, and I haven’t.

Hon Paul Goldsmith: Can he assure New Zealanders that he’ll keep a substantial part of the $20 billion spare from the COVID fund as a contingency in the case of a later outbreak?

Hon GRANT ROBERTSON: I, in fact, talked exactly about that when I announced it on Budget day.

Hon Paul Goldsmith: How long is he planning to keep up his average of announcing $200 million of new spending a day since the Budget, and how does he think New Zealand will pay for it?

Hon GRANT ROBERTSON: I would have to go back and look at the figures that the member has just put forward there. What we have done throughout the last 2½ months or so is what New Zealanders wanted us to do, which is cushioned the blow of this virus on both our economy and our society, and we will keep doing that.

New Zealand’s entrepreneurs, innovators and crown researchers will benefit from a $401.3 million funding boost through Budget 2020 and the COVID Response and Recovery Fund to help deliver jobs and a stronger economy in a post-COVID world, Research, Science and Innovation Minister Dr Megan Woods said.

During term 3, the Ministry of Education will begin providing free period products to schools following the Government’s $2.6 million investment. The roll-out will begin at 15 Waikato schools and be expanded to all state and state-integrated schools on an opt-in basis in 2021.

“Our plan to halve child poverty in 10 years is making a difference but there is more to do and with families hit hard by the COVID-19 global pandemic, it’s important to increase that support in the areas it can make an immediate difference.

Free period products to schools seems like a worthwhile initiative but it has been campaigned for by the Greens for some time and it seems very loosely connected to Covid.

An iconic New Zealand tourism attraction and the country’s 31 Regional Tourism Organisations are the first recipients of support from the $400 million Tourism Sector Recovery Plan, to help position the sector for recovery from COVID-19, Tourism Minister Kelvin Davis announced today.

Yesterday’s Ministry of health Covid-19 update showed that there have been no new cases for a week, and that there is now only now only case that is still ‘active’ (and that may have been active for a month so is nowhere near new).

But Grant Robertson says the Government will still wait a week and a half before making any decision about changing the current Level 2 restrictions.

On Monday Jacinda Ardern said that Cabinet would only re-evaluate Level 2 restrictions in two weeks time – that’s on 8 June, and a change to Level 1 may not happen for up to four weeks (to 22 June).

The Government was flexible and would review alert level settings on June 8, he said, and reiterated Cabinet would look at moving to level 1 no later than June 22.

But he would not commit to action when asked whether having only one active case made it more likely that Cabinet might consider whether New Zealand was ready to move to level 1 earlier.

“The worst thing of all would be for New Zealand to move backwards again,” he told a media conference in Wellington.

No one wants to go back to Level 4, or even Level 3. But if people see ongoing restrictions as unjustified and ignore them, and don’t take seriously and future restrictions that poses greater risks.

The Government had wide and strong public support when we went into lockdown in March. But as the apparent dangers from Covid quickly reduced the public has tended to relax more quickly that Government restrictions were lifted.

There appears to be virtually no threat now. If the Government keeps restrictions on despite this they risk losing public support, which is likely to lead to people pushing boundaries or ignoring restrictions more.

Police allowed dozens of people to gather for the tangi of a Black Power member in Dunedin during lockdown.

As many as 50 people waited in a car park outside a funeral home for the tangi on April 30, blocked roads and later gathered at a gang pad, documents released to the Otago Daily Times under the Official Information Act show.

Many had travelled from outside Dunedin for the event.

Despite the breaches, police said in an internal email ‘‘trying to stop it will only create a worse situation for all’’.

There’s a real risk that if the Government is too cautious and pedantic in trying to prevent any cases at all it will create a worse situation if there is a second wave, and the public don’t care about restrictions that may be applied again and ignore them.

With next to no cases in the country now the public is largely moving forward while the Government retains restrictions and holds back business and employment.

The Government today announced a new temporary payment to support New Zealanders who lose their jobs due to the global COVID-19 pandemic to adjust and find new employment or retrain.

Further support for New Zealanders affected by 1-in-100 year global economic shock

12-week payment will support people searching for new work or retraining

Work programme on employment insurance to support workers and businesses

A new COVID Income Relief Payment is being introduced, alongside a wider work programme on possible future employment insurance as we rebuild our economy in a way that supports workers and businesses together.

The payment will be available for 12 weeks from 8 June for anyone who has lost their job due to the impact of COVID-19 since March 1. It will pay $490 a week to those who lost full-time work and $250 for part-time. The payment will not be taxed.

Finance Minister Grant Robertson said the payment acknowledges that the global economy is facing a 1-in-100 year recession, which is impacting on New Zealand, and supports the Governments priority of protecting jobs where possible and supporting workers back into jobs where necessary.

The scheme announced today is very similar to the Job Loss Cover payment introduced by the previous Government during the Canterbury earthquakes, and has a number of similarities to the ReStart package for workers who lost their jobs in the Global Financial Crisis.

Receipt of the payment comes with expectations from the Government, and responsibilities. People who receive the COVID payment will be required to:

Be available for, and actively seeking, suitable work opportunities while they receive the payment

Take appropriate steps towards gaining new employment; and

Identify and take opportunities for employment, re-deployment and training.

Students who have lost part-time work as a result of COVID-19 may also be eligible for the part-time rate.

The 12-week scheme is forecast to cost about $570 million. This incorporates $1.2 billion of payments offset by $635 million of saved benefit payments, with small administrative costs. This fits with the Government’s intention for COVID response spending to be targeted, temporary and timely. It will be funded from the COVID Response and Recovery Fund.

But you can’t help thinking that it will be a rude shock to those who were already unemployed, who could barely dream of the sort of income the Government will provide those newly jobless.

The new scheme is generous – about twice the rate of the JobSeeker Support benefit – and, crucially, your partner can earn up to $2000 a week before tax, without it affecting your ability to claim.

Compare that to the Jobseeker Support, where you and your partner can only earn a combined $90 a week before it starts to reduce the rate of benefit you can qualify for.

A household receiving this new Covid-19 support could end up bringing in $1976 a week for 12 weeks, after tax, in total. That’s a much more comfortable life than the $375 for a single parent (plus up to $305 in accommodation supplement) on Jobseeker Support.

It seems that the Government has decided there are two classes of unemployed – those “worthy” unemployed who are only out of a job because of a global pandemic, and so should be allowed to carry on with their lives much as before, and those “unworthy” who lost their jobs or were unable to work for other reasons and so should be expected to live a subsistence lifestyle.”

Gezza commented:

This also came up on 1News at 6 last night & Robertson’s attempt to defend the government’s decision to be more generous to presumably a high proportion of white middle class pakeha affected by Covid-19 was presented in a way that made him appear unconvincing.

Muller was shown pointing out (as Labour would if in Opposition) that this was unfair & there needed to be consistency & equivalence.

Muller also said in that 1News item that the focus should be on businesses and how to keep them afloat to keep people in jobs.

Newshub’s picked it up too:

“We support supporting New Zealanders in a moment of significant need, but our concern with that announcement is it’s ill-defined and ill-directed,” he said on Monday during a press conference.

“What would’ve been better is a stronger focus on businesses to keep them in business… When we build together our economic plan, our focus will be on what do those small businesses actually need to be able to stay afloat. And I think that’s where the focus should be.”

The 2020 budget will be announced by Minister of Finance Grant Robertson at 2 pm today. It is one of the most unpredictable budgets in a long time, having to be re-written to address the unprecedented challenges in dealing with the economic impact of the Covid-19 pandemic.

Some signals have already been made, with jobs and welfare priorities. Some budget decisions have already been announced, such as a big boost to hospital spending and a long overdue boost to spending on dealing with family violence, as wel as a rescue package for the racing industry. See:

Record investment in hospitals and health services
Budget 2020 delivers the biggest ever increase in funding for District Health Boards, as well as additional funding to deliver approximately 153,000 more surgeries and procedures, radiology scans and specialist appointments to help clear the COVID-19 backlog.

Next steps to end family and sexual violence: Budget 2020
The 2020 Budget includes significant support to stabilise New Zealand’s family violence services, whose work has been shown to be so essential throughout the COVID-19 lockdown.
$183.0 million over the next four years for the Ministry of Social Development to ensure continued access to specialist family violence services

The driving priority of the 2020 Budget will be to make direct cash injections into industries such as tourism, to staunch the flow of job losses, reinvent the way the sector operates with the prospect of few customers from offshore, and to ensure viable businesses make it through the medium term.

The Budget will also give a much clearer picture of the impact on economic growth, unemployment and government debt.

Last week, Treasury figures for the nine months ended March showed the initial hit to the government’s finances from the pandemic.

The forecast surplus of $1.3 bn had turned into a deficit of $2.7 bn, as government expenses blew out by more than $4 bn as the first few weeks of the wage subsidy took effect.

Expectations are that government borrowing will mushroom by another $100 – $120 bn over the next four years, which would take the net debt ratio to something approaching 60 percent of GDP.

With such big numbers being thrown around and restrictive spending targets and prudence flying out the window opened by Covid around it is possible a number of ‘nice to have’ progressive type policies will be funded.

The Treasury today released the Crown financial statements for the nine months to the end of March. Net Core Crown Debt was 21.3% of GDP with an OBEGAL deficit of $2.7 billion.

Core Crown tax revenue was $0.4 billion above December forecasts, due to higher-than-forecast PAYE, GST and customs and excise duties reflecting the growing economy before COVID-19. Core Crown expenses were $4.4 billion above forecast, reflecting the financial support for businesses and the health system as we went hard and early in our response.

“As of yesterday the wage subsidy scheme has paid out more than $10.6 billion dollars to more than 1.7 million workers. The scheme was in place from March 17, more than a week before the country went into Alert Level 4.”

MSD figures show jobseeker figures are up around 40,000.

There has been a tenfold increase of people coming back from overseas and onto the jobseeker benefit.

There has been an increase of 30 percent of vehicle traffic since moving to level 3.

Treasury says business activity would be back to 75% of prior levels under level 3 and 85% when we drop to level 2, but level 3 has actually been 80%.

The budget will be delivered next week. It is likely to be quite different to past budgets.+

The Government is protecting the integrity of New Zealand businesses correctly accessing the wage subsidy by prioritising the audit process for businesses where complaints have been laid.

A dedicated MSD investigations team is working with IRD and MBIE to ensure businesses using the scheme as intended are not undermined by the actions of a few, Finance Minister Grant Robertson and Social Development Minister Carmel Sepuloni say.

The scheme has paid out $10.4 billion to protect jobs and support the incomes of over 1.6 million New Zealanders. This has kept businesses connected to their workers during the lockdown, so they are in a good position to start up on the other side.

Across the country hospitality businesses are making plans and getting prepared to reopen under alert level 3 on Tuesday. The Restaurant Association expects about a third of the roughly 9000 cafes and restaurants to open, but to stay within lockdown rules and attract customers many are having to get creative.

Potential to open NZ-Aus border

Both New Zealand and Australia’s prime ministers see merit in opening up the borders between the two countries in the future but only when it is safe to do so.

Jacinda Ardern and Scott Morrison have discussed the possibility but no plans have yet been confirmed.

Morrison told Australians last night that he would be open to the idea of allowing travel between Australia and New Zealand before border restrictions are completely relaxed.

Morrison says New Zealand is the obvious country to open back up to given the similar Covid-19 trajectories.

But a spokesperson for Ardern says the country’s borders are the best protection against Covid-19 and while the idea has merit, nothing is going to happen immediately.

I expect both countries will want to see how relaxing restrictions go first.

Minister of Finance Grant Robertson addressed Business NZ today, and ‘filled out further detail’ of: “…our plan for the response and recovery from COVID19, through the first wave of the immediate response, to the second wave of kickstarting the economy and the third wave where we reset and rebuild our nation from this once in a century shock.”

He also spoke on “the economic context… what our exit from Level 4 and moves through Level 3 and Level 2 look and feels like”.

The following has the Government self praise edited out.

Our Plan to Respond and Recover

Wave One: Fight The Virus and Cushion the Blow

Our initial $12 billion package included an initial $500 million boost for health, wage subsidies for affected businesses in all sectors and regions, a $2.8 billion income support package for our most vulnerable, a $100 million worker redeployment package, $2.8 billion in business tax changes to free up cashflow encourage investment, and support working from home, and a $600 million aviation support package.

We have continued to add to and modify the range of policies aimed at cushioning the blow of COVID-19 on New Zealanders.

We’ve put together the Business Finance Guarantee Scheme, alongside the Reserve Bank and retail banks. The Scheme is designed to help enable banks to provide credit to customers where otherwise the bank may not be willing to do so.

Nine banks have signed up to participate in the scheme including ANZ, ASB, BNZ, Heartland Bank, HSBC, Kiwibank, SBS Bank, TSB and Westpac. Over the weekend I signed the deed, executing the agreement between the Crown and the banks, with some banks now able to deliver on the scheme as of yesterday.

We’ve also recently announced changes to the Companies Act to help companies facing insolvency remain viable.

These changes include giving directors of companies a ‘safe harbour’ from insolvency duties under the Companies Act, enabling businesses to place existing debts into hibernation, allowing the use of electronic signatures, and giving temporary relief for entities that are unable to comply with requirements in their constitutions or rules because of COVID-19.

In addition to these changes, this morning we announced a suite of further support measures for Small and Medium Sized Enterprises.

Our tax loss carry-back scheme will allow a large number of businesses to access their previous tax payments as cash refunds, at an estimated benefit of $3.1 billion.

We are bringing forward the tax loss continuity rules to make it easier for firms to raise new capital without losing the tax benefit of their existing losses. This is a useful initiative particularly for start-up companies.

Using established services including the Regional Business Partner Network and the helplines run by the Employers and Manufacturers Association and Canterbury Chamber of Commerce, we are providing $25 million to fund specialist, tailored advice to where it is needed, fast. We have been getting clear feedback that particularly small and medium enterprises are asking for support on business continuity.

We have also introduced measures to support commercial tenants and landlords.

Many businesses may be finding it difficult or impossible to pay rent if they are no longer able to access their property, and if landlords are not receiving rent, they may not be able to meet their mortgage obligations.

As a result, the Government will extend the current 10 working day timeframe that commercial landlords may cancel the lease to 30 working days. This will be for both the period the tenant is in arrears before the notice is given, and for the period to remedy the breach.

The Government will also extend the timeframes for lenders from 20 to 40 working days for mortgaged land, and from 10 to 20 working days for mortgaged goods.

Wave Two: Kickstarting the Economy

The guidance we are releasing on Thursday for coming out of Level 4 will give businesses and workers a much better idea of what the more medium-term picture looks like for them, for the economy, and for society.

We have a range of workstreams well underway aimed at the medium term positioning for recovery. I will mention some critical ones today.

We have established the Economically Significant Business Group inside the Treasury to guide our work with New Zealand’s major businesses. We have brought in outside commercial expertise to support this, and have begun conversations with a range of network critical businesses. There are a variety of options available should the Government need to support businesses that are essential to our recovery and our supply chains. We showed with our $900 million package for Air New Zealand what we can do.

Phil Twyford and Shane Jones have tasked the Infrastructure Industry Reference Group to prepare a list of infrastructure projects and programmes from across central and local government, and the private sector, that are shovelready. These could be deployed as part of a stimulatory package as soon as the construction industry returns to normal.

The Reference Group is headed by the Chair of Crown Infrastructure Partners, Mark Binns. It is supported by the work David Parker is doing in terms of changes to the RMA and consenting process to move things forward as quickly as possible.

Phil Twyford and Shane Jones have also continued to work on redeployment support, especially in our regions and they will have more announcements to make about that in the near future.

Megan Woods as Housing Minister is working to bring forward projects that will drive not only jobs, but also deal with our long term housing issues.

I have asked Chris Hipkins to lead the work on the critical training and employment support programme that has to take place from here. Thousands of New Zealanders are going to need to retrain, gain new skills and support the kickstarting of our economy. This work is in partnership with business, with unions and with training providers.

The Prime Minister, drawing on advice from her Business Advisory Group, has called for the creation of the world’s smartest border. Using technology and our ‘natural moat’ as she calls it, to give us not just protection against the virus but a window to a future where we can move people and goods safely again.

Winston Peters and David Parker are charting a new course for trade and diplomacy in a radically changed world. We need to continue to trade, and look again at our relationships to see how we can leverage our natural advantages and excellent progress on controlling the virus.

In every sector of our economy and society we have a need, and an opportunity, to come through the other side of this with a strong recovery plan. We have tasked all Ministers with reaching out to their sector to help develop these plans.

The Budget will be a Recovery Budget. It will include funding for the cost pressures that are necessary part of keeping our country ticking over. But we will devote much of our resources to kickstarting this recovery.

Wave Three: Reset and Rebuild

We have formed a core Ministerial Oversight Group for this work with the Prime Minister, the Deputy Prime Minister, myself and Minister Parker. We will soon be reaching out to both Ministerial colleagues but also the private sector, unions and more to have input into this work.

Climate Change will continue to be a major challenge long after the effects of this pandemic have been mitigated. As Rod Carr raised yesterday, our economic recovery needs to be one where emissions continue to reduce and more sustainable technologies are invested in and taken up.

New Zealand has had a long-run problem of low productivity. We need to look at our uptake of new technology and new ways of working to ensure that this problem does not again become baked into the New Zealand economy through our recovery.

We’ve seen through this virus what happens when sectors and industries are overly reliant on certain markets for their export revenue. New Zealand must always remain a trading nation, but we will need to look at greater diversification of our export markets to make sure we are prepared for any future shocks to trade networks.

The importance of the role of the state has been underlined by this crisis.

I believe it is of the utmost importance that the state continues to play an active part in the economic recovery, providing leadership and direction as we move forward through the challenging times ahead.

Economic context

This is largely a preamble to the announcement being made tomorrow “guidance for how businesses could operate under reduced alert levels and what measures need to be taken for them to do so” so we might as well wait for what is released tomorrow.

“We have taken decisive action throughout this pandemic to cushion the blow for our businesses and workers – today’s announcement continues that focus. We need our businesses to stay solvent to help with the economic recovery as we emerge from this health crisis.

“Our focus on cashflow and confidence continues through these measures. We have approved a tax loss carry-back scheme that will allow a large number of businesses to access their previous tax payments as cash refunds. Essentially this means a forecast loss in the current financial year can be offset against the tax paid on a profit from last year.”

We are also changing the tax loss continuity rules to make it easier for firms to raise new capital without losing the benefit of their existing tax losses” Grant Robertson said

Minister for Small Business Hon Stuart Nash says some businesses are struggling to meet their non-wage fixed costs, like interest, rent and insurance, but are not currently in a position to take on additional debt.

“In the absence of further support from the Government, these otherwise viable SMEs may be forced to close down permanently.

“We don’t want that to happen, so as well as the tax measures which should provide some cashflow relief, we are going to provide tailored support services to help businesses weather the storm, at no charge to the business.

“Using established services including the Regional Business Partner Network and the helplines run by the Employers and Manufacturers Association and Canterbury Chamber of Commerce, we can get specialist, tailored advice where it is needed, fast. This could range from human resources advice to business continuity planning to financial management – because every one of these small businesses will have a different need,” Stuart Nash said.

New measures are also being announced to support stability in commercial property transactions, extending the timeframes required before landlords can cancel leases and mortgagees can exercise their rights to sale or repossession.

Justice Minister Andrew Little says many businesses may be finding it difficult or impossible to pay rent if they are no longer able to access their property, and if landlords are not receiving rent, they may not be able to meet their mortgage obligations.

“As a result, the Government will extend the current 10 working day timeframe that commercial landlords may cancel the lease to 30 working days. This will be for both the period the tenant is in arrears before the notice is given, and for the period to remedy the breach.

“The Government will also extend the timeframes for lenders from 20 to 40 working days for mortgaged land, and from 10 to 20 working days for mortgaged goods. This will apply to commercial mortgages and home loans. However, the already announced mortgage deferrals are likely to be the first port of call for residential borrowers.

Questions were asked at today’s Epidemic Response Committee about what different alert levels will mean to businesses wanting to restart. There seems to be a focus on “what constitutes safe economic activity”.

Simon Bridges probing the “levels” in relation to the economy. Treasury’s modeling shows the lower the level, the better the economy. He said businesses are telling him they want to go to level 2. “Level 3 is a bit of a no man’s land”.

Grant Robertson is saying the detail of the lockdown coming this week will give business some clear guidance of what’s permitted. He’s saying it will show us “what constitutes safe economic activity”.

He says he’s been working with the construction sector to work out what safe economic activity looks like.

Robertson is saying the enthusiasm for coming out of lockdown early can actually mean yo-yo-ing between levels, which isn’t good for economic activity either.

Paul Goldsmith asking about “what sort of pragmatism” will be brought to the health regulations that will determine how businesses work under levels 2 and 3.

Robertson said work is underway on those issues, so there would be real clarity.

Contact tracing will be important too. “Knowing who is in your workplace, knowing where they are and what they’re doing”. This will help us manage flare ups as they come.

Responding to Marama Davidson, “the best economic response is a strong public health response”.

Sounds like a patsy.

University of Otago epidemiologist, Professor David Skegg, said countries that had not succeeded in controlling this disease, their economies were not going to flourish.

“I’m not an economist, but I would be very surprised if we’re going to do worse economically because of the measures we’re taking in the medium term.”

He stressed that the country should get to level 2.

“We need some careful planning this week on what level 3 or level 3.5 would look like.

“It’s not just a health issue and it’s not just an economic issue,” Skegg said.

From RNZ Live:

Simon Bridges said level 3 was akin to no man’s land with the downsides of level 4.

Finance Minister Grant Robertson said when deciding on moving to level 2 and 3, his focus was on “what constitutes safe economic activity?”

“Level 4 is doing exactly what we wanted it to do for New Zealand and New Zealanders. The last thing we want is to come out level 4 and create a situation where we have to yo-yo between levels.”

Meanwhile, Paul Goldsmith said businesses needed clarity on returning to work and how social distancing would look like in the working environment.

“There’s a shared desire among industry workers, government to get people back to work as soon as possible. Health and safety is a very important part of the workplace,” Robertson said.

“The best economic response is a strong public health response and that has to be underpinned by an investment in our health system.”

Stuff:

Michael Woodhouse asking whether the “principles approach” is sector based or risk based.

The question is really whether or not the businesses that open will be determined by the kind of business they are (for example cafes) or the kind of measures that are put in place by any business, so cafes that follow those guidelines could reopen, whereas the one’s that don’t implement the guidelines don’t reopen.

Robertson said it will be mainly the latter (so not sector-based) BUT you can’t completely detach sectors from the guidelines.

The Minister of Finance Grant Robertson has released Treasury scenarios that look at the economic impact of the Covid-19 virus. Not surprisingly Treasury supports the ‘go hard, go early’ approach of the Government.

The scenarios show:

That unemployment can be kept below 10%, and return to 5% in 2021 with additional Government support. Work is already well advanced on further fiscal support.

Without additional support, unemployment could have hit 13.5% under scenario 1 (four weeks in Level 4), while scenarios requiring more time in Level 4 showed a peak of 17.5%-26%.

New Zealand’s underlying strength means the economy can bounce back to be $70 billion larger by 2024 than in 2019.

There must be a lot of unknowns at this stage, and the information given is very sparse.

Economic scenarios released today back the Government’s decision to go hard and early in the fight against COVID-19 while putting significant measures in place to protect jobs and support businesses through the lockdown, Finance Minister Grant Robertson says.

The Treasury has released a range of scenarios for the economy, based on assumptions of different amounts of time under the Alert Levels. The report shows how extra Government spending will cushion the blow by protecting jobs and supporting businesses.

“This global pandemic is dramatically affecting countries and their economies around the world. We are seeing dire forecasts for global growth and unemployment levels rising rapidly in many countries. As an open export-led economy, New Zealand will feel these global effects for some time to come,” Grant Robertson said.

“New Zealand is in a good position to fight COVID-19 due to our strong public health system, low debt and growing economy heading into this situation. The best way to protect the economy is to fight this virus, which is why we’ve acted swiftly and decisively to stamp out COVID-19. This will give our businesses and the economy the best chance to get going again on the other side.”

The scenarios released today were guided by a range of previously released public health modelling. The Treasury has purposefully included scenarios that show what might happen if the lockdown has to be extended, or if the country has to return to Alert Level 4 in the future.

“These should not be taken as any guide as to the Government’s thinking or decision on changing alert levels. That decision will be taken on April 20 as the Prime Minister has foreshadowed. What they do show is how important it is that we continue to unite against COVID-19 and follow the public health guidelines; stay home and save lives – we know it’s working,” Grant Robertson said.

The scenarios show:

That unemployment can be kept below 10%, and return to 5% in 2021 with additional Government support. Work is already well advanced on further fiscal support.

Without additional support, unemployment could have hit 13.5% under scenario 1 (four weeks in Level 4), while scenarios requiring more time in Level 4 showed a peak of 17.5%-26%.

New Zealand’s underlying strength means the economy can bounce back to be $70 billion larger by 2024 than in 2019.

Work on further significant Government investment to protect jobs, support cashflow, and prepare the economy for recovery is well advanced. The next steps in the Government’s plan to support businesses will be released later this week.

“The Budget is also another important part of the response, and it will include significant support to respond to and recover from COVID-19. As is usual with the Budget, there may well be pre-announcements, especially where they relate to urgent COVID-19 response activities,” Grant Robertson said.

The Government has already provided support to businesses including:

$9.6 billion through the wage subsidy to protect the jobs of over a million working New Zealanders and keep them connected to their employers during the lockdown.

Changes to the business tax system worth $2.8 billion to boost cashflow, encourage investment, and support working from home, including:

Allowing businesses to immediately claim tax deductions for low value assets like computers, mobile phones, cameras, microphones, headphones and other equipment required to work from home

Raising the threshold for provisional tax to support cashflow

Writing off penalties for late tax payments to take pressure off business owners

Restoring the ability to depreciate some buildings to support cashflow and investment

Working with the banks to deliver a six-month mortgage deferral scheme so Kiwis don’t lose their homes as a result of COVID-19, and a $6.25 billion Business Finance Guarantee to encourage bank lending to small and medium-sized businesses.

“We can do this because we entered this situation with strong Government books and a growing economy. Net debt at 19.2% of GDP is well below the OECD average around 70%, giving us greater ability than many to protect jobs and incomes with the Government’s strong balance sheet,” Grant Robertson said.

Notes:

1. The scenarios do not foreshadow Government decisions on the lockdown. Cabinet will make the decision on whether to exit Alert Level 4 on April 20.

2. Fiscal forecasts, including for measures like the Government’s operating balance and net debt, will be released as normal in the Budget on 14 May.